A bad week to be Canadian
If the government is going to oppose carbon taxes, it should at least come up with talking points that make sense, writes JOSEPH HEATH.
Being a Canadian is so embarrassing these days. We seem to be doing everything possible to convince the rest of the world that we are a bunch of morons.
I’m not talking about Rob Ford’s antics at Toronto city hall. I’m talking about the behaviour of our new minister of the environment, Leona Aglukkaq, at the United Nations Climate Change Conference in Warsaw this week.
Ford may be getting all the headlines, but what Aglukkaq is doing is far more damaging to Canada’s international reputation in the long run. Her offence is not so much that she is working to sabotage any effective agreement to limit greenhouse gas emissions. This is just standard Canadian policy, and while it may make us look like bad people, it doesn’t make us look stupid. After all, everyone knows that our economic interests lie in digging up and selling as much oil as possible before the clock runs out and the remaining carbon becomes “unburnable.”
No, what Aglukkaq did that makes us all look stupid is that she chose to defend Canada’s position using the same preposterous talking points that the Prime Minister’s Office has approved for use domestically. In defending her hostility to carbon taxes, she said that “we know a carbon tax would increase the price of everything in Canada.” This is the same old talking point that we’ve been hearing from the Conservative government since 2008.
The problem with saying this sort of thing at a high-profile international conference is that it’s bulls---, in the technical sense of the term. In other words, it’s a claim that is not only not true, but that doesn’t even pretend to be true. Like the phrase “your call is important to us,” you only have to stop and think about it for a moment to realize that it couldn’t be true.
For starters, if you were to increase the price of everything in Canada, that would be equivalent to increasing the price of nothing. Prices are just the exchange ratio of goods, and so are unaffected by their absolute level. The phrase is literally nonsensical.
On the other hand, if you were to increase the price of everything except money, then that would be called inflation. One could conceivably oppose carbon taxes on the grounds that they would be inflationary, except that central bank policy in Canada right now is intended to be inflationary (that’s why interest rates are low). So increasing the prices of all goods and services would be good for the economy.
But of course, increasing the price of carbon emissions would not increase the price of all goods and services. It would increase the price of exactly one thing, namely, carbon emissions. Whether or not that would result in other prices being increased throughout the economy is a decision that would be made entirely by the free market.
That is precisely why carbon taxes were initially proposed by free-market economists, and are favoured by the responsible right everywhere. They are the environmental equivalent of a surgical strike. They hit precisely the intended target, with none of the collateral damage associated with old-fashioned environmental regulation.
Most importantly, carbon taxes leave it entirely up to market forces to determine whether the increased price of carbon emissions is going to raise the price of other goods. If entrepreneurs and consumers are able to substitute away from carbonintensive power sources (such as coal), toward carbon-neutral power sources (such as hydroelectric or nuclear), there is no reason that prices have to rise.
The important point, however, is that these decisions are all made by the market, not by the government. The only question that the government needs to answer is what the correct price for carbon should be. The current answer in Canada, federally, is zero. Because of this, people who oppose carbon taxes (or cap-and-trade systems, which according to the current government are the same thing) need to explain why zero is the correct price.
Standard economic theory tells us that price should reflect social cost. If your consumption imposes a cost on some other person, then you should have to pay.
Seen in this light, the only way that the correct price for carbon could be zero would be if the social cost of carbon emissions was also zero. And the only way that the social cost of carbon emissions could be zero would be if these emissions made no contribution to harmful climate change. So for people who are willing to think through the consequences of their views, there is practically no daylight between rejection of carbon taxes and the denial of anthropogenic climate change.
But of course, the reason Aglukkaq is making these claims is not that she is incapable of thinking through the consequences. It is because the Conservative government has made the rather cynical calculation that a sufficient percentage of the Canadian population is not really interested in thinking through the consequences, and so there is simply no need to develop rational policies in this area. They have chosen message discipline over message coherence.
I understand the domestic political considerations that led them to this conclusion. My only hope would be that, at least when they travel abroad, Canadian ministers might try a bit harder to avoid insulting the intelligence of the international community. Could we not have some different talking points at least? Especially when we are addressing the victims of our economically self-serving policies, it seems to me that we could at least have the decency to come up with a set of more convincing lies.